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Are you interested in starting your own real estate venture? If you want to strike it rich in real estate investment then you need to understand the business is more than just making your money back. You also need to grow your money. If you’re up for the challenge but are not sure where to begin, listen up! And check out the list below to help you strategically begin your venture.
Choose the Right Location
Researching the demographics of your area will help you strategically place your project. Towns with major universities may be more prone to apartment complexes, while rural communities may enjoy homes that are built further apart.
Knowing your future customers will be financially rewarding in the long run. Be sure to pay attention to the surroundings, nearby amenities and facilities that could add value to your property.
Don’t just buy land in a strange area because it’s cheap. Make sure you have a plan for how it will add value to the community. Lastly, it isn’t necessary to live near your property as long as it’s constructed correctly. If it is old and falling apart, you probably will need to keep a close eye on it at all times.
Our rental properties were the result of changing jobs. We’d buy a house in the new job location and then move again and keep the house as a rental.
Build a Healthy Credit Score
For new investors, you will likely need to borrow money to begin work on your first property. To qualify for a mortgage loan, your credit score needs to be in good standing.
If you have outstanding debt, it’s important you handle that first before asking for another loan.
Research Money Lenders
Once you choose a location, determine how much money you will need to borrow and research banks that will help you finance your venture. Have your research done and a rough estimate of the funds you will need before approaching a banker or mortgage broker.
There’s always the chance that a bank may not completely help you finance your project. So you might want to consider turning to private money lenders. Private money lenders can quickly provide you with the money you need.
Typically they use the property as collateral for the loan. This can be a great way to get your real estate venture off the ground because hard money loans are often more flexible and customized than traditional bank loans.
Set a Smart Rental Price
Always stay up-to-date on the housing market in the area you plan to invest in. Understand whether it’s a buyer or seller market so you don’t end up overpricing your property.
The majority of investors follow the 1% rule – meaning a rental property must make 1% of the price you paid for it every month. For example, if you buy a property for $200,000, then the monthly rental income should be $2,000 (200,000 x 0.01). Be sure to make your property worth the selling price in the long run.
Hire a Real Estate Agent
Hiring a real estate agent will take a lot of work off your plate when it comes time to find renters. Before hiring an agent, do extensive research and interview several potential agents in your area to get a feel for the right fit.
You want to ensure you will have tenants that are responsible and will help you pay back the loan that allowed you to purchase the property.
Hiring an effective real estate agent will not only benefit your credibility as an owner, but it will also clear up your schedule so you can focus on managing the property instead of the renters.
Create an Emergency Fund
Even with perfect planning, life comes with uncertainty and unpleasant surprises. Weather issues, contractor delays, and material shortages can cost a project more than anticipated. Not having the funds set aside to cover unexpected delays could bring your project to a standstill.
It’s critical that you have flexibility in your budget to accommodate unexpected issues so you can work around the problems instead of waiting for them to be resolved.
The sooner you begin your journey in real estate investing, the more successful you will be. Owning property is a great opportunity to save money for retirement and to supplement a standard 9 to 5 day job.
If you do your research and become knowledgeable in all aspects of property management, it’s quite possible that investing in real estate will be the best decision you’ve ever made.
Krystle Cook – the creator of Home Jobs by MOM – put her psychology degree on a shelf and dived into a pile of diapers and dishes instead. She is a wife and mother to two rambunctious boys, sweating it out in her Texas hometown. She loves cooking, DIY home projects, and family fun activities.